The U.S. dollar index (DXY00) rose 0.22% today, driven by the stronger-than-expected June ISM services report. The dollar gained further support as yen weakness persisted, following Japan’s inaction in the foreign‑exchange market while U.S. markets were closed for a holiday, a typical window for Japanese intervention.
The June ISM services index slipped 0.5 points to 54.0, in line with market expectations. The services price‑paid sub‑index eased to 67.7, down from 71.3 in May, exceeding the forecast of 67.5.
Swap markets currently price a 24% probability of a 25‑basis‑point rate hike at the upcoming FOMC meeting on July 28‑29.
EUR/USD fell 0.17% today as the dollar strengthened. Euro pressure stemmed from weaker‑than‑expected May retail sales data for the Eurozone. Nevertheless, the euro’s decline was tempered after the July Sentix investor confidence index rose more than anticipated, reaching a four‑month high.
Eurozone May retail sales increased 0.2% month‑over‑month, falling short of the 0.3% forecast.
The July Sentix investor confidence index rose 10.3 points to -3.1, its highest level in four months, surpassing expectations of -10.0.
German May factory orders rose 1.9% month‑over‑month, outperforming the 1.1% forecast.
The market currently assigns a 3% probability to a 25‑basis‑point ECB rate hike at its July 23 policy meeting.
USD/JPY rose 0.60% today, with the yen weakening as Japan did not intervene while U.S. markets were closed for a holiday. The retreat occurred despite a surge in 10‑year Japanese government bond yields to 2.841%, the highest level in 29 years, which reinforces the yen’s interest‑rate differential.
Intervention risk remains high as the yen stays above 160 per dollar, near a 39‑year low, a level at which Japanese authorities have previously intervened.
The market prices a 1% probability of a 25‑basis‑point BOJ rate hike at the July 31 policy meeting.
August COMEX gold rose 0.61% to 25.00, while September COMEX silver increased 1.81% to 1.106.
Gold and silver prices climbed today, reaching 1.5‑week highs. They retained support from last Thursday’s weaker‑than‑expected June payrolls, which dampened expectations of further Fed tightening, and from today’s lower crude oil prices that have eased inflation outlooks and may encourage global central banks to loosen policy, a positive for precious metals. However, a stronger dollar is curbing further upside.
Recent fund outflows have turned bearish for precious metals, with long positions in gold ETFs slipping to a 9.5‑month low last Friday, down from a 3.5‑year high reached on February 27, and long silver ETF positions falling to an 11.25‑month low after a 3.5‑year peak on December 23.
Strong central bank demand continues to support gold prices, as China’s People’s Bank of China increased its gold reserves by 320,000 ounces to 74.96 million troy ounces in May—the largest monthly rise in 17 months and the nineteenth consecutive month of accumulation.
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.